Market Comments 6/28/2012

Polished prices coming under increasing pressure as poor Hong Kong show disappoints suppliers. Tight liquidity, plummeting rupee and irresponsible Indian government policies destroying Indian demand. DTC sightholders, tired of losing 10% to 20% on overpriced rough, are refusing boxes. Irrational, exploitative rough prices expected to decline as cutters run out of money. U.S. consumer confidence falls to a 5-month low of 62 in June. Chow Tai Fook FY 2012 revenue +61% to $7.3B, net income +79% to $847M. Rockwell Diamonds 1Q revenue -24% to $5.9M as prices slump 42%. Itzu Kaszirer passes away at age 90.Fancies: Demand for fancy shape diamonds improving with reductions in discounts. Price conscious consumers buying more fancy shapes as their prices appear more attractive than rounds. Manufacturers are shifting production back to fancies in light of shortages. Square cuts doing better than curves (Pear Shapes, Ovals, Marquise etc.). Fancy shapes remain less liquid than rounds and may trade at significantly higher discounts for medium to less-well-shaped diamonds. Very large (5 ct.+) top-quality well cut fancies attracting some investment demand.

Global Markets

United States: Polished demand is stable but quiet ahead of the summer vacation ‎period, with the New York Diamond Dealers Club (DDC) scheduled to close next week ‎‎(July 2–6). Buyers continue to avoid large inventory purchases and are focused on ‎sourcing what they need to fill orders, which remains a challenge given the shortage of ‎well-made commercial SI goods in the market. Retail demand is steady but below 2011 ‎levels with sales of bridal jewelry the dominating trend. There is rising demand for fancy ‎shapes and color diamonds. ‎

Belgium: Overall market sentiment is sluggish as Antwerp bears the brunt of the Euro-‎debt crisis. In addition, Antwerp-based Indian dealers are increasingly cautious due to the ‎fragile rupee and economic concerns in India. Rough trading is weak with Diamond ‎Trading Company (DTC) boxes selling at discount, if they’re selling at all. Similarly, ‎polished dealers are lacking confidence. There is relatively steady demand for ‎commercial, 0.50-carat to 1.99-carat, G-H, SI certified goods. ‎Israel: The mood among dealers is somewhat deflated as the Hong Kong show further ‎confirmed the weak global environment. Dealers and manufacturers of fancy shape ‎goods are experiencing better activity than those focused solely on rounds, and are ‎holding their prices firm. Prices for round stones are showing more vulnerability, ‎especially VVS goods. Liquidity is tight but there are no widespread reports of panic ‎selling. Polished buyers are traveling to source bargain goods in other markets, ‎particularly in India. Rough trading is very quiet with manufacturers under pressure to ‎maintain their profit margins. ‎

India: Market sentiment is weak and price uncertainty is causing buyers to hold back on ‎their ‎purchases. Tight liquidity, low profit margins, the depreciating rupee, rising inflation ‎and ‎weak domestic demand are all contributing to the cautious mood among rough and ‎‎polished dealers. Demand for better quality goods is weak, while there is relatively steady ‎‎demand for small, commercial quality stones. Rough buyers are waiting for rough prices ‎‎to ease and trading on the secondary market is at a virtual standstill. Cutting continues at ‎‎levels below capacity but factories are turning goods in order to maintain their workforce. ‎‎Rough and polished inventories are rising.‎China: Polished demand has slowed as retail sales are down from last year and jewelers ‎are still holding inventories of goods bought during last year’s first-half uptrend. They are ‎still reluctant to buy in the current market environment. Chinese buyers attending the ‎Hong Kong show were very conservative in their buying despite the fact that suppliers ‎were prepared to reduce prices. Buyers expect further price declines as wholesalers ‎remain uncertain about economic prospects for the second half of 2012. There is steady ‎demand for 0.30-carat to 0.50-carat, G-H, VS-SI diamonds. ‎Hong Kong: Wholesale trading is quiet while the weak June show reflected sluggish ‎demand from Mainland China, and low confidence among polished dealers. Demand is ‎focused on VS-SI goods, while better quality VVS stones remain difficult to sell. Local ‎sentiment is weak and trading is expected to remain slow through July. ‎